us stock market, stock split

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5/1/02 Stock Split Report Market Summary
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Stock Split Report Subscribers:

MARKET ALERT SERVICE

Target hit alerts issued this week: LSTR (+$10.85); SKIL put (+$2.45 per option); AMSY (+$2.50; +12%; bounce play); HLYW (+$4; +22%); CNMD (+$5.45; +25%); CMX (+$3.60; +19.5%); FRED (+$5.56; +16%); RCII (+$8.80; +17.5%); ACDO (+$8.73; +16%; initial target & still holding positions).
Trailing stops issued: SYK; CBSH; SYMC
Stop alerts issued: OREX; VARI; ETM; PRGX; SPIL

Subscribers to the current reports can sign up at the following link:
http://www.investmenthouse.com/alertssr.htm

Emails: We love your emails. We receive hundreds of emails a week, but we don't mind. We respond to them all as fast as we can, so bear with us.

SUMMARY:
- Dow and big caps, sans techs, put together a second rally session.
- Not a powerful rally, mirroring the economy.
- Manufacturing still expanding, but at a more leisurely pace.
- Auto sales smoking; GM boosting production.
- Rally has the down trendlines to reckon with now.
- Team Trades

Market did its selling intraday and started the rally anew.

The Tuesday rally was in the trash can and rolling toward the curb when the Dow and S&P tested and did not undercut Tuesday's lows. The Nasdaq undercut the low, and we were picking around for some more downside plays when we noticed the Dow and big caps holding the line. We put the puts on the back burner and started looking upside. CAND and CCRN were early choices as things started back up, and things spread out from there.

Techs were more or less left out. They did recover well off the lows with the Nasdaq doing the same. They may have done there selling Wednesday as well given the strong reversal on stronger volume. With the techs it is more the news of the day that dictates their action; with all that overhead they have a hard time sustaining any decent pattern.

New rally or the same one with the same problems?

Did today's selling constitute the end of Tuesday's rally and the start of a new one based on the ARMS reading this past week? Perhaps. The Nasdaq undercut Tuesday's low, and technically that is a failed rally. You have to note, however, that the index reversed on Monday off of the lows, and though it did not turn positive it did recoup a significant chunk of the losses and helped initiate Tuesday's rally. Wednesday's low did not undercut the Monday reversal low. The point: Wednesday's recovery well off of that low indicates a desire to continue the move higher. It did not finish positive, so most don't call it a rally. The big reversal on very heavy volume indicates that it is. The Dow and S&P did not undercut, and technically they are in the same rally though their big sell off also indicates a test and then a move higher.

In a practical sense the indexes have the same problem: they have to beat the near term down trendlines and all of that overhead supply. A steep sell off leads to sharp rebounds. We are in the midst of a sharp rebound, but we also note that NYSE volume was significantly lower than Tuesday's end of the month shuffling, and the Nasdaq closed lower on stronger volume. Many of its big names recovered off of their lows on strong volume, but still closed firmly negative. The same problems that have plagued the market still plague the market. When you have this kind of selling, it is a tough climb out of the hole. We continue to take positions in the strongest stocks and patterns as that protects us from the next convulsion when investors get some news they do not like.

THE ECONOMY

Once again economic reports were not blowout early in the session. Indeed, it appears as if the market is a mirror of the economy. Appears? That is exactly what it is. The market feeds off of the economy because the economy dictates earnings. Back in 2000 the market started massive distribution and selling even as the economy continued to be labeled 'white hot' (reach for air sick bag now) by the Fed Faithful. You could see and we frequently wrote about the problems developing in the economy. They may not have been massive (at least not enough to lose the 'white hot' moniker - - reach for bag again), but they were clear. Combined with the market action, there was a serious problem ahead. We know the rest of the story.

The Dow, small cap, and mid cap indexes are holding up the best of all the market. The Dow has IBM, INTC, HWP and MSFT to deal with, but the rest of it is chock full of 'old economy' stocks. The small and mid-caps are from all sectors, but they are seen as values as the economy recovers. Many Nasdaq stocks are sensitive to early economic recovery; Nasdaq moves, however, are dominated by a relatively few techs. Techs, as we have said several times, are not as a whole going to mount any sustained recovery this year.

Thus, the action in the market is a reflection of the economy once again. Those stocks that are economically sensitive are leading the way in the recovery both in the economy and in those sectors of the market. On the upside plays, this is the trend we have been playing. On the downside we have been playing the techs as they rally and then disappoint. Overall the economy is looking strong; much stronger than the recent selling. Gloom about the economy's prospects is high even as the economy shows no sign of a double dip recession. Thus, we don't think it will be too long before stocks really price in future gains once again as opposed to taking prices lower. Will they do it in techs? Expectations after this round of earnings are low; right now most are not even planning on a second half 2002 recovery. We are not, but then again, we will let the patterns tell us if it is time or not.

ISM still expanding, but more slowly.
+53.9 shows continued expansion in manufacturing, but it was lower than expectations of 55.0 and March at 55.6. Inventories were 42.9 versus 41.2 in March; building a bit or a slowing fall? As we discussed last week, it depends upon your perspective. The numbers show inventories are still falling, but at a slower pace. That means there is no buying (we no that is not the case), or that there is buying and inventory replacement ongoing. With the strong consumer, we know it is the latter, though it is nothing strong. Prices shot up to 60.3 from 51.9 on the back of the energy price increases. Before concluding that means inflation, we have to look at the environment. In 1984 and again in the early 1990's, rising energy prices never made it into final pricing. In today's climate with no pricing power and a weak recovery, those price increases more than likely will not be passed on this time as well. New orders were down 6 points (59 from 65.3). It was not a robust report, but it was one that showed continued expansion, something we were dying for during that long stretch of manufacturing recession.

Construction drops.
March construction was down 0.9% versus expectations it would be flat. February was revised lower to +0.7% versus +1.1% prior. The decrease in construction was the biggest drop since June 2001. Again, not a strong report, but we do have to note that much of the building, more than expected, was done in the mild late winter. Moreover, on an annualized basis, even with the decrease in March, construction is on a pace that has historically shown a recovery is underway, easily capable of 3% to 4% annual growth.

Auto sales just won't stop.
The U.S. love for its vehicles is as old as the highway system if not older. Wednesday automakers released April's numbers, and they are just impressive. April was a 17 million unit pace. Perspective: 2001 was 17.1 million; 2000, the best year ever, was 17.35 million. There is no real falloff from the end of 0% financing. GM sales rose13% when expectations were flat. GM truck sales leaped 24% year over year. Huge, huge gains in a very profitable part of the business. Chrysler was up 3%. Ford fell 7.4%, but that was better than expected as its Jaguar and Land Rover divisions did very well. Nissan jumped 14.8%. A big month. Consumers are buying their vehicles still. It would appear that the consumer confidence report that indicated more people were going to buy a car and a home in the future was pretty accurate.

THE MARKET

Massive selling in the morning and a rebound in the afternoon. That leans toward bullish action, showing buyers were ready to step in even after Tuesday's rally was effectively washed away. A week ago there would have been no recovery attempt. Indeed, in most of the failed rallies seen the past two years were hammered and sellers did not let them up for air. Today was a change as buyers marched right back in after 'bad' news on the ISM (really good news) was seen for what it was, i.e., the third straight month of manufacturing improvement.

Volume did not expand on the Dow and S&P gains, and this is typical of a relief bounce after serious selling. Still we note that even the lower volume was higher than most of the downside volume on the preceding two selling weeks. We also note that Tuesday's volume was the end of the month, and there was a bump there. There was buying strength today, enough to get us into upside positions. The next step is the down trendlines. Those are huge obstacles; if broken and tested, however, the ARMS rally looks decent. Again, the action is enough to get us into upside positions.

Put/Call Ratio (CBOE): 0.72; -0.08. Activity was high but it dropped off as the indexes rallied in the afternoon. Still in a high range but never gave us the 1.0 or higher close that is typically indicative that extreme sentiment has been hit.

Nasdaq

Yet another test lower followed by a rebound. This choppy action that continually tests the same lows and rallies back on high volume is indicative of a change. Volatile, choppy action with wide swings is a sign of change after a steady trend one direction or the other. The Nasdaq is showing this kind of action now, with today's reversal on very high volume. It is right at the down trendline, and it is still in a downtrend. We can enjoy a rally, but lets not lose sight of the trend.

Stats: -10.70 (-0.6%) to close at 1677.53.
Volume: 2.188 billion (+4.8%). Volume ran higher for the second session, but on a point loss. Technically distribution, but a big recovery again. Given the up versus down volume, it is hard to call today an accumulation session.

Up volume: 659 million (-906 million)
Down volume: 1.503 (+1.005 billion). A huge swing in the up versus down volume. Again, hard to fudge and call this an accumulation day.

A/D and Hi/Lo: Decliners took over again at 1.12 to 1. Not a strong day for decliners, but continues the tug of war.

New highs: 181 (-14)
New lows: 91 (-17)

The Chart: http://www.investmenthouse.com/cd/$compq.html

Undercut Tuesday's rally low but not Monday's reversal. It is hard to count Monday as a reversal session (lower volume), and today's action clearly undercut Tuesday. Rally or not? The important points: much more volatility, testing the recent lows and jumping off of those levels. That shows the volatility that often accompanies attempts to change direction. That is short term bullish. Second, Nasdaq is at the tight down trendline from March (1675) and still has to deal with the February low (1696 to 1700), the 10 and 18 day MVA (1709.62 and 1735.89), and the next short term down trendline at 1750. Summary: it is trying to change direction after a strong round of selling after the March interim high. It has a lot of resistance ahead of it as it tests the downtrend and the layers of resistance overlaying that. The attempt to hold above 1620 from back at the April 2001 lows is a mild positive, but holding there is quite a way from a sharp rally.

Dow/NYSE

Has bounced two consecutive sessions and is now at the March down trendline. The test and recovery off of the lows shows strength. How it deals with the down trendline will show how much strength. Not holding our breath. But for the ARMS reading, we would not have much faith in this. We still don't have much faith in it, but we are open to being shown we are wrong.

Stats: +113.41 (+1.1%) to close at 10,059.63.
NYSE Volume: 1.441 billion (-12%). Big drop in volume on the gain, showing less strength in the move. Tuesday's volume was due somewhat to the end of the month, but the large volume decline indicates less accumulation of stocks.

Up volume: 1.025 billion (-143 million)
Down volume: 401 million (+34 million)

A/D and Hi/Lo: Advancers continued to lead but lower at 1.58 to 1 (2.36 to 1). Not great action, but still solid on the heels of Tuesday's breadth.

New highs: 204 (+43)
New lows: 43 (-26). Fifth consecutive session with greater than 40 new lows. According to Dow theory, 5 consecutive sessions above 40 new lows is a further selling signal for the Dow. They have been falling and not rising the past two sessions, so that is taken into account. How the Dow handles the down trendline will not be very key.

The Chart: http://www.investmenthouse.com/cd/$indu.html

Tested the recent lows on the session low (9830.67) and rebounded 229 points to close positive. On the high (10,086.61) the Dow tapped the March Down trendline and pulled back. The trendline is now right at 10,070 and is just below resistance at 10,100 and the 18 day MVA (10,104.95). As we have noted, the down trendline and the 18 day MVA are tough to beat in a downtrend. For now the trend remains in tact; the Dow rallied sharply once again, but volume did back off. Not anemic volume at all; there was still a lot more buying than selling again today. What we have seen is nothing we have not seen thus far in the downtrend. It will have to break the trendline on strong volume, and we would really like to see a test of that breakout. Until then, for upside positions we look at the stocks that have continued to perform. If it fails, we look at some index puts.

S&P 500:

Very similar to the Dow, testing the week lows on the session low (1065.29) and rallying sharply. The reversal from Tuesday is thus still in tact, but of the major trends at this point, the downtrend is of most significance. The 10 day MVA (1091.41) is just below that down trendline now at 1093. On top of that is 1100 and the 18 day MVA (1102.03). Those levels will most likely at least cause a pause in any attempt to move higher. The lower volume, even with the continued strong up volume, leaves this move's ability to break the downtrend in question. For now it looks just like another rally off of the lows in a downtrend.

Stats: +9.54 points (+0.9%) to close at 1086.46.
Volume: NYSE volume was strong but fell on the rally to 1.441 billion (-12%).

The Chart: http://www.investmenthouse.com/cd/$spx.html

End Part 1 of 2

us stock market
stock split